Health care prices can quadruple based on location, study says

WASHINGTON — An ankle MRI at one doctor’s office in downtown Washington costs $400. Move about two miles northwest to another’s doctor office, and the price more than quadruples to $1,861. Head out to the Virginia suburbs, and the price jumps $300 more.

This kind of price variation has become common in health-care markets across the country, according to data from Castlight Health. It also highlights how little consumers typically know about the cost of the medical care they receive — and how much leeway hospitals and doctors have in setting prices.

Castlight works with employers to provide transparency into the health-care costs that workers face. The five-year-old company relies on data collected from 3.7 million workers in hundreds of metropolitan areas, creating one of the largest troves of private health price information.

“We realized people were paying more and more out of pocket,” Castlight chief executive Gio Colella said. “The average deductible is about $5,000 in an industry where people have little understanding of what they’re paying for. We wanted to solve that problem.”

Castlight’s first study, in 2010, looked at the price of colonoscopies and found that the same doctor’s fees could vary fivefold, depending on at which hospital the procedure was performed.

“That part blew me away,” said Colella, who has a medical degree and worked as a psychiatrist before founding Castlight. “It didn’t make sense to me. My engineers started coming back with data, and I thought there were errors in it.”

Their information shows that, nationally, some doctors might charge as little as $92 for a mammogram, while others charge $314. In another example, a chest X-ray can cost $25 to $97.

In some cases, health providers reduced their fees once Castlight made the price data public. One Midwestern hospital cut the cost for outpatient radiation by 60 percent after a Castlight report.

“I don’t think they’re a bad guy,” Colella said. “They’re using a system in which they believe this is what their value is. The ecosystem is complex.”

Not all hospitals and doctors compete on price. Castlight also ranks doctors by quality, reflecting the level of care the doctor provides. Some hospitals might feel emboldened to charge more if they can deliver better results, Colella said.

“In a sense, a lot of hospitals are trying to figure out how to provide fair prices. That’s why we think transparency is so critical,” Colella said.

Castlight is betting that this type of transparency could transform health care, reducing costs. The government is unlikely to regulate the price of health care any time soon, which creates an opportunity for consumers to seek different avenues for lowering their costs, Colella said.